Price control measures introduced by the Zimbabwe government this month are already having widespread negative repercussions, with many locally owned enterprises already considering closure. But as Peta Thornycroft reports for VOA, talks between the ruling party and the opposition continue under the mediation of South African President Thabo Mbeki.

Two women walk past empty bread baskets in a supermarket in Harare, Zimbabwe, 10 Jul 2007

And almost as quickly, the impact reverberated deeper into the economy, to manufacturers. One clothing manufacturer who asked to be called Bill to protect his identity and who depends on imported raw materials, says he won't be able to afford to continue production.

Bill imports most of his raw materials, and pays for them with foreign currency he acquired on the black market, or parallel market as it is called in Zimbabwe. Even so, he says, he will very soon be unable to operate, and several hundred Zimbabweans will lose their jobs as a consequence.

"Now with the enforced prices I am going to divert a container that I had due to come into the country because if they force me to sell garments that I manufacture at prices that they dictate I am going to be out of business very soon," said Bill. "I am not going to go to jail, I will sell out what I have and I will not replace, so at the end of the day my business would have nothing to produce and would be forced to be closed."

The government says it will nationalize companies that stop production. And so many large foreign owned manufacturers with headquarters based in South Africa have indicated they intend to comply with the price controls.

Fuel has almost disappeared from the formal market in the second city Bulawayo, and is critically short in the capital Harare. Economic consultant Daniel Ndlela, says public transport is at a minimum and most workers are forced to walk long distances to get to their jobs.

"It's a nightmare now, I take walks in the morning, and you see people walking to work, walking to town, without transport, and in the evening it's pathetic to be on the roads, because there is literally no transport, and people are walking in a manner that is actually frightening, and you know these people will be walking for twenty kilometers," said Ndlela.

Ndlela warns that while President Robert Mugabe's price cutting exercise will destroy the private sector, and is unlikely to reign in spiraling inflation, believed to be well over 5,000 percent. He says it will not curb the trading of the currency, the Zimbabwe dollar, on the black market.

"When you legislate on the final price of the product it means you have a problem; the destruction is going to be simultaneous, if retailers are not ordering products, the manufacturers are going to stop manufacturing; if manufacturers are not manufacturing, the producers of raw materials are going to stop production," said Ndlela.

Despite the deepening economic crisis, the regional mediation initiative, facilitated by South African president Thabo Mbeki, between the ruling ZANU-PF and the opposition Movement for Democratic Change has continued.

But veteran human rights activist and author Judith Todd who was involved in the liberation struggle for an end to minority white rule argues the mediation is misplaced.

"And I think the focus from the outside world is on all the wrong things, they shouldn't be talking to ZANU-PF, the instrument of our misfortune, the surrounding states should be engaging with civil society from Zimbabwe, and with the opposition, with the churches," said Todd. "Everyone should be getting together to say how do we remove Mugabe, there is not going to be an election next year there is just going to be terror, terror until more and more people drop down dead."

ZANU-PF and the MDC were last month asked by President Mbeki's mediation team to begin with a draft constitution the two parties agreed to in secret negotiations in 2004 as a basis for an agreement. The two parties have met four times in Harare since then. For its part the South African mediation team have agreed will come up with proposals to improve the political climate in which parties can operate in Zimbabwe .

No date for the next round of talks in Pretoria has yet been announced.